Each pixel of the light sensor, CCD or CMOS, should be able to register 'color' &amp; light intensity (exposure). The advent of the Fovean chip enables each local pixel to capture color information even more "accurately" without the need for interpolation.

Why should the problem of over and underexposure still exits with digital cameras?

Why emulate film cameras, because people are used to the way they operate. The same reason why computers use QWERTY keyboards rather than the superior Dvorak layout which makes it much faster to type (QWERTY was originally invented to slow down typists to prevent keys from getting stuck).

ISO on digital cameras turn up and down the gain of the amount of light that is registered on each photosite...but with turning up gain you also turn up noise. Even happens on video cameras with a "gain up" button.

Why should the problem of over and underexposure still exits with digital cameras?

The reason is because the sensor can only sample a certain range of brightness in light. And that range is mush smaller than the human eye can handle. By changing the exposure (increasing or decreasing the light) you effect how much light the sensor gets and this lets you give the sensor the amount of light it needs for a given scene. But if the sensor gets the wrong amount it over exposes (i.e. you get white with no details) or you under expose (dark places are pitch black and have no details.) The problem is that if a scene has too wide a range of brightness, there is nothing you can do about it... some parts will be either under exposed or over exposed. Nothing you can do about it in that one picture.

Your pupil does the same thing for the human eye, enlarging or shrinking to control the amount of light that gets through and hits the back of your eye.

As to the question of ISO.... well, they could have changed, but how? The effect it has is useful (making the camera more sensitive to light, in trade for more noise/grain in the picture), so are you suggesting that they rename it?

But even at a certain light level the eye will lose colour information as the colour "sensors" in your eye require more light than those that just sense light. If you are in that situation, you will see in B&W, and what you see will look grainy.